Summary
SentinelOne's fiscal 2026 third quarter, ended October 31, 2025, produced revenue of $258.9 million, up 22.9% from $210.6 million in the prior-year quarter. Annualized recurring revenue climbed 23% to $1,055.3 million. The number of customers spending at least $100,000 in ARR rose 20% to 1,572. Gross profit reached $191.1 million, up 21.4%, yet GAAP gross margin slipped to 73.8% from 74.7%. Management tied the pressure to higher cloud hosting and customer support costs, more amortization of acquired intangibles, and rising amortization of capitalized internal-use software.
Operating leverage improved sharply. The GAAP operating loss narrowed to $73.3 million from $89.1 million, and operating margin improved 14.0 points to -28.3%. Net loss narrowed to $60.3 million from $78.4 million, and diluted loss per share came in at $0.18 against $0.25 a year earlier. On a non-GAAP basis, the company reported operating income of $17.7 million versus an operating loss of $10.7 million a year ago, and non-GAAP net income of $24.8 million compared with $75 thousand. Stock-based compensation remains the largest reconciling item between the GAAP and non-GAAP presentations.
Cash generation turned positive. Operating cash flow was $21.0 million for the quarter, compared with negative $7.2 million a year earlier. Free cash flow, which SentinelOne defines as operating cash flow less purchases of property and equipment and capitalized internal-use software costs, was $15.9 million against negative $12.6 million in the prior-year quarter. For the nine months, operating cash flow reached $72.2 million versus $37.1 million. Capital expenditures were $0.1 million for the quarter and $0.5 million year to date, down 52.0% and 68.8%. Deferred revenue of $569.5 million rose 14.4%, and remaining performance obligations of $1.30 billion were up 34.1%, evidence that longer-term commitments keep building.
The nine-month view is less flattering at the bottom line. Revenue for the nine months was $730.1 million, up 22.5%. Net loss widened to $340.5 million from $217.7 million, and diluted loss per share widened to $1.04 from $0.70. Most of that swing traces to income taxes and a large unrecognized tax benefit tied to Advance Pricing Agreement negotiations with the U.S. Internal Revenue Service and the Israel Tax Authority. No resolution has been reached. If an agreement is concluded, SentinelOne may have to make significant payments to the Israeli government over a number of years. A separate review of intellectual property acquired with Prompt Security could also produce a cash tax liability in Israel.
Guidance points to steady expansion and continued margin discipline. For the fourth quarter of fiscal 2026, management guided revenue to $271 million, non-GAAP gross margin to 77.5%, and non-GAAP operating margin to 5%. For the full fiscal year 2026, it guided revenue to $1,001 million, non-GAAP gross margin to 78.5%, and non-GAAP operating margin to 3%. The full-year outlook absorbs an estimated 1% hit from the end-of-sale of the Hologram deception solution. The operating margin outlook includes an estimated 120 basis points of impact from foreign exchange, about 70 basis points from the Prompt Security acquisition, and about 60 basis points from the Observo AI acquisition. Emerging products, including data, AI, and cloud offerings, accounted for roughly 50% of quarterly bookings.
Leadership turnover adds near-term uncertainty. CFO Barbara Larson will leave for a role outside cybersecurity after serving through mid-January 2026, and Chief Growth Officer Barry Padgett will step in as interim CFO while the company searches for a successor. The macro backdrop stays difficult. Management points to longer sales cycles and deal downsizing by new customers and on renewals, especially among large enterprises, along with changes in U.S. federal spending and the risk of government shutdowns. Competition is intense, and the company still carries a history of losses.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2026 | Q2 FY2026 | QoQ | Q3 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $258.9M | $242.2M | +6.9% | $210.6M | +22.9% |
| Gross profit | $191.1M | $181.7M | +5.1% | $157.4M | +21.4% |
| Gross margin | 73.8% | 75.0% | -1.2 pp | 74.7% | -0.9 pp |
| Research & development | $83.1M | $79.1M | +5.1% | $70.5M | +18.0% |
| Sales & marketing | $126.6M | $127.9M | -1.0% | $123.7M | +2.3% |
| General & administrative | $51.5M | $51.5M | +0.0% | $52.3M | -1.6% |
| Total operating expenses | $264.4M | $262.3M | +0.8% | $246.5M | +7.2% |
| Operating income (loss) | -$73.3M | -$80.6M | +9.1% | -$89.1M | +17.7% |
| Operating margin | -28.3% | -33.3% | +5.0 pp | -42.3% | +14.0 pp |
| Net income (loss) | -$60.3M | -$72.0M | +16.3% | -$78.4M | +23.1% |
| Net margin | -23.3% | -29.7% | +6.4 pp | -37.2% | +13.9 pp |
| Diluted EPS | -$0.18 | -$0.22 | +$0.04 | -$0.25 | +$0.07 |
| Customers | 1,572 | 1,513 | +3.9% | — | — |
Risks
MD&A and risk factors state that current macroeconomic conditions have caused a decline in usage and consumption patterns from certain customers, especially larger enterprise customers, longer sales cycles, and deal downsizing by new customers and of renewals by existing customers, especially larger enterprises. They expect these global macroeconomic conditions impacting demand to persist in the near term.
The company is making significant investments in generative AI, including Purple AI, and in September 2025 acquired Prompt and Observo. Risk factors warn that third-party foundation models may change availability or commercial terms, competitors may incorporate generative AI more successfully, and AI investment may negatively impact gross margins and competitive position.
Ongoing bilateral Advance Pricing Agreement negotiations with the IRS and Israel Tax Authority led to a $136.0 million income tax expense for unrecognized tax benefits in the nine months ended October 31, 2025. If an APA or settlement is reached, the company may be required to make significant payments to the Israeli government.
In September 2025 the company acquired Prompt, a generative and agentic AI security company, and Observo, an AI-ready data pipeline company, and paid $244.7 million net cash for acquisitions in the nine months ended October 31, 2025. Risk factors cite integration challenges, retention of key employees, and potential unanticipated liabilities or write-offs.
Restructuring charges increased by $12.2 million for the nine months ended October 31, 2025 due to the March Plan and July Plan, and the July Plan is expected to be completed by the end of fiscal 2026. Risk factors note the company cannot guarantee these cost-reduction efforts will be successful or that it will not re-accelerate operating expenditures.
Risk factors highlight dependence on sales to government organizations, which are subject to budgetary uncertainty and the newly established Department of Government Efficiency. FedRAMP authorization is costly to maintain, and loss of authorization or budget pressures could restrict sales to government customers.
Gross margin decreased 0.9 percentage points to 73.8% in the quarter ended October 31, 2025 from 74.7% in the prior-year quarter, primarily due to higher cost of revenue associated with scaling operations, cloud hosting usage, and amortization. AI investments may further negatively impact gross margins.
SaaS KPIs
All quarters →Non-GAAP gross margin
Customers with ARR of $100,000 or more
Non-GAAP operating margin
Free cash flow
Free cash flow margin
Non-GAAP net income margin
Operating cash flow margin
ARR
Summary, forecast, risks and KPIs are extracted from SentinelOne, Inc.'s SEC filings for Q3 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.